Estoppel Insurance: Waiver and Estoppel in Insurance

estoppel insurance

Insurance-related cases occasionally involve the use of estoppel law. A legal notion known as estoppel binds a party to certain accepted norms of conduct. We’ll talk more about waivers, estoppel in insurance, how estoppel operates, kinds of estoppel, an illustration of estoppel, and estoppel insurance.

Estoppel insurance—what is it?

Estoppel forbids an insurance company from taking a stance that is incompatible with one it has previously taken if doing so would cause harm to the insured. This provides reassurance to policyholders that their insurance will not interfere with their interests.

Estoppel Insurance Illustration

If the insurance company has a history of accepting late payments from other insured individuals, it will not be able to cancel your insurance if you submit a late premium payment. This is because, based on the insurance company’s practice of accepting late payments from other customers without repercussion, you believed that a late payment would not result in the cancellation of your policy.

What is Waiver

An insurance company “waives” its right to cancel an insured’s policy for nonpayment in this case if it decides to accept the insured’s late payment and keep her policy active. Usually, a waiver is either implied (by behavior) or expressed (spoken or in writing). In essence, it denotes the renunciation of a right by an individual or entity. In the example of the late payment, as soon as the insurance company accepted and cashed the insured’s late payment and extended her policy, it forfeited its ability to cancel the policy for nonpayment.

What is the Estoppel?

A legal theory known as estoppel forbids people from arguing or asserting a right that goes against what they have previously stated or what the law has mandated. Simply put, estoppel forbids someone from disputing a past deed or speech. It is a component of common law that serves to shield individuals from suffering unfair harm as a result of the inconsistent statements or deeds of others. Collateral estoppel and promissory estoppel are two of the most prevalent types of estoppel.

How Estoppel Operates

Common law is a type of legislation that originates from precedents and rulings made by judges. This indicates that statutes or other pieces of legislation are not the basis for the establishment of laws. The English common law served as the foundation for the majority of the American legal system. That was before the nation’s legal system advanced to the point where it established precedent and created its brand of common law.

Nearly every nation with a common law legal system, such as the US, Canada, and the UK, has included various versions of the estoppel theory in its legal frameworks. The principle of consistency in speech and deeds is universal, despite variations in names across different nations.

Estoppel, as previously said, forbids people from acting or claiming in a way that is inconsistent with what they have said or done in the past. To put it another way, estoppel makes sure that someone honors their word and doesn’t unjustly harm another person. Therefore, if Person A promises something to Person B and then backs out, they have to keep their word.

Kinds of Estoppel

Different kinds of estoppels exist. Here are a few of the most prevalent ones in the legal field.

  • Collateral Estoppel: A collateral estoppel precludes someone from bringing the same complaint before the court again. This stops abuse of the legal system and harassment of the law.
  • Estoppel by Deed: This kind of estoppel forbids someone from contesting the veracity of any information contained in a deed they have carried out.
  • Equitable Estoppel: If a person’s actions might cause injury to another party, they are prohibited from adopting a legal position that differs from or is inconsistent with their prior position.
  • The term promissory Estoppel: is frequently used in contracts. Whether or not there was a formal contract between the parties, promissory estoppel shields the person who relied on their reasonable promise and later suffered a substantial financial loss as a result of the other party’s breach.

Other less well-known types of estoppel include reliance-based estoppel, laches, estoppel by silence, and estoppel by record.

An illustration of Estoppel

In a case involving two neighbors in Iowa, promissory estoppel was at the center of the dispute. A farmer’s neighbor promised to sell the farm to him for $3,000 per acre at a later date.
Subsequently, during the lease, the farmer made significant improvements to the land, hoping to eventually acquire ownership of it. However, the owner gave the land to a third party, which led to a lawsuit being filed by his neighbor, who claimed he was entitled to buy the farm.
The farmer received $52,000 in damages from the jury throughout the trial to cover the modifications made to the land. The matter eventually made its way to the Iowa Court of Appeals, which decided that the written lease agreement was not necessary for the farmer’s option to buy the land to be enforceable. The court ruled that the neighbor’s understanding of the farmer’s reliance on the promise was clear. Consequently, the farmer received an order for damages from the landowner.

FAQs:

What Does Estoppel Mean?

One element of common law is estoppel. It is a legal precept that forbids someone from unjustly harming another person by breaking their word to them. The court has the authority to prevent someone from breaking a promise they made to another party if they file a lawsuit.

An Estoppel Certificate: What Is It?

The mortgage and commercial real estate industries frequently use estoppel. Likewise known as an estoppel letter or certificate, it involves using a tenant-signed document. This document attests to the terms of the landlord’s rental agreement. If the landlord or property owner attempts to do anything with the property, such as selling it or attempting to refinance a debt, it may be provided to a third party.

What Kinds of Estoppel Are There?

Estoppel is available in a variety of formats. Some are less well-known, while others are more prevalent. They consist of collateral estoppel, equitable estoppel, promissory estoppel, and estoppel by deed. Other types of estoppel include reliance-based estoppel, laches, estoppel by silence, and estoppel by record or deed.

The Final Word:

Acts do not form the foundation of the common law system; rather, judicial precedents do. Estoppel is one of the tenets of the common law. Estoppel, despite its seeming complexity, makes sure that one party cannot unjustly harm another by breaking a promise. This implies that a person cannot lawfully withdraw a promise they made to a third party. This is particularly valid if the deeds of one individual cause injury to another.

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